When uncertainty and volatility are elevated, many investors will sit on the sidelines and wait for things to calm down. However, that’s precisely what you want to avoid. Savvy investors know that the best time to buy high-quality Canadian value stocks is when market sentiment is negative and great businesses are trading cheaply, not because of their own operations but because of broader economic concerns.
Right now, between the potential for more inflation, a lack of clarity around interest rates, and growing fears of a prolonged global trade war, there’s no shortage of reasons why stocks are selling off. But if you’re investing for the long haul, and especially if you’re using a tax-free account like a Tax-Free Savings Account (TFSA), these periods of weakness are exactly when you want to be putting capital to work.
Of course, not every stock trading at a discount is worth buying. But when strong businesses with solid fundamentals and long-term growth potential dip well below their intrinsic value, that’s when long-term investors need to act.
So, with volatility picking up and plenty of high-quality stocks trading cheaply, now’s the time to shift your focus to value and start putting your TFSA dollars to work.
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What’s going on, and which stocks are reliable?
There’s no shortage of headlines causing uncertainty in today’s market. Between ongoing tariff threats, stalled rate cuts, and increasing concerns about slowing global growth, sentiment has turned negative fast.
However, while many investors are worried about what could go wrong in the next few weeks or months, long-term investors should be focused on what’s likely to go right over the next several years.
That’s where Canadian value stocks come in. These aren’t just cheap companies trading at low multiples. High-quality Canadian value stocks are well-established businesses with reliable operations, strong cash flow, and a track record of weathering tough environments.
The key is to find companies that are still generating consistent earnings and returning capital to investors. Whether it’s through dividends, share buybacks, or reinvestment into their own operations, these are the types of businesses that not only survive turbulent markets but can often emerge even stronger when conditions eventually normalize.
So, although weaker businesses continue to be impacted while the uncertainty remains elevated, now is the perfect time to add exposure to high-quality businesses while they are being undervalued.
Three of the best Canadian value stocks to buy now
If you’ve got cash in your TFSA and want to take advantage of the current economic environment, there are plenty of high-quality Canadian value stocks to consider.
For example, one of the concerns investors have in this environment is the impact that higher tariffs, and consequently higher inflation, could have on consumer spending.
That’s why we’re seeing stocks like Aritzia (TSX:ATZ) and Cargojet (TSX:CJT) trading well off their highs.
Right now, Aritzia, a consumer discretionary stock, is down roughly 40% from its 52-week high. Furthermore, it’s currently trading at a forward price-to-earnings (P/E) ratio of just 17.9 times. That’s right at the bottom of its trading range over the last five years and well below its five-year average forward P/E ratio of 27.4 times, showing what an excellent buying opportunity investors have in this environment.
Meanwhile, Cargojet, a stock that benefits significantly from online shopping, is trading nearly 50% off its 52-week high. At this price, it’s trading at a forward enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio of just 5.4 times. That’s also essentially the lowest it’s traded in the last five years and well below its five-year average forward EV/EBITDA ratio of 9.9 times.
It’s not just high-quality consumer discretionary stocks that are cheap, though. For example, another Canadian value stock to buy now is InterRent REIT (TSX:IIP.UN), a residential real estate investment trust with the potential for significant long-term growth.
With interest rates remaining elevated for the time being, InterRent continues to trade cheaply. In fact, not only is it down roughly 20% from its 52-week high, but it’s trading at a forward price-to-funds-from-operations ratio of just 16.3 times, significantly lower than its five-year average of 23.8 times.
So, if you’ve got cash in your TFSA and you’re looking for Canadian value stocks to buy now, there’s no question that this environment is creating significant opportunities you won’t want to ignore.
